South Africa's Vodacom to Buy a 34.94% Indirect Interest in Safaricom in $2.59 Billion Deal -- Update

By Alexandra Wexler Features Dow Jones Newswires

Vodacom Group Ltd. (VOD.JO), South Africa's largest mobile operator by subscribers, said Monday it has agreed to acquire a 35% stake in Safaricom Ltd., Kenya's biggest mobile operator, from Vodafone International Holdings B.V. by issuing 226.8 million new ordinary shares.

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Based on Vodacom's closing price Friday of 152.49 rand per Vodacom share on the Johannesburg Stock Exchange, the deal is worth ZAR34.6 billion ($2.59 billion), a 5.9% discount to the Safaricom share price on the Nairobi Securities Exchange at closing ahead of the announcement.

Vodacom, which is majority-owned by Vodafone Group PLC (VOD.LN), plans to acquire 87.5% of the issued share capital of Vodafone Kenya Ltd., which holds a 40% interest in Safaricom and is wholly owned by Vodafone. Vodafone will retain a 12.5% interest in Vodafone Kenya, and about a 5% interest in Safaricom, after completion of the proposed transaction. Vodafone will subscribe for new Vodacom Group shares.

Vodacom says it hopes to to "create further value through closer cooperation between both companies, including best practice sharing; replication of Safaricom's success in M-Pesa in Vodacom Group's other territories; and the creation of new pan-African enterprise solutions in contiguous markets in East Africa."

Vodacom expects the interest in Safaricom to contribute about 15% of its earnings, based on Vodacom's net profit for the year ended March 31, which rose from a year earlier, due to strong customer additions in South Africa, where the company added 3 million subscribers.

Net profit rose 3.9% to ZAR13.42 billion. Revenue rose 1.5% to ZAR81.28 billion.

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The company declared a second-half dividend of ZAR4.35 a share, making the total dividend for the year ZAR8.30 a share.

Write to Alexandra Wexler at alexandra.wexler@wsj.com

(END) Dow Jones Newswires

May 15, 2017 02:37 ET (06:37 GMT)